I first heard the phrase “calm company” when Tyler Tringas rebranded what was once Earnest Capital to Calm Company Fund. I remember reading the announcement post and nodding my head—the idea of building a calm company resonated with me, and still does.
While the “calm” language was new, the underlying concepts were familiar—they were at least similar to what I knew to be a “lifestyle business,” yet without the negative connotations that have come to be associated with that phrase.
A calm company was what I was after—a calm company is still what I’m after. But as I’ve reflected on Outseta’s journey, I’ve found myself increasingly thinking about what actually makes a company calm.
Tyler’s memo defines a calm company has having the following attributes:
- Calm Companies are patient and have long-term ambitions
- Calm Companies stand by their convictions, even in hectic times
- Calm Companies prioritize physical and mental health across the entire team
- Calm Companies don’t sacrifice the sustainability of the business for short-term growth
Tyler’s co-host of a podcast focused on calm companies, Arvid Kahl, offers this definition:
“Calm companies focus on profitability and sustainability. They succeed by growing slowly and deliberately, calmly adapting to changes in the market without the need for a soul-sucking grind to total market domination.”
I like both definitions quite a bit—although I think the phrase “growing slowly” does the concept a disservice. The fastest growing companies I’ve worked with have often felt the most calm!
But the idea now defined the question remains—how do you build a calm company?
Calm is a feeling more than a strategy
Calm is ultimately a feeling, rather than a predefined method of building a business.
The word is an adjective, defined by Cambridge University Press as “a feeling of being peaceful, quiet, and without worry.”
Even if you set out to build a calm company, markets and company building in general are volatile—I’d argue that start-ups by their very definition are not calm!
You’re not necessarily going to get what you bargained for. There are certainly strategies you can employ that increase the odds of a company feeling calm, which I think is ultimately what Calm Company Fund ultimately offers and advocates for. By providing founders with a relatively small amount of capital, they’re able to build their companies towards profitability without the financial stress that so often wreaks havoc on bootstrapped founders. And the objective is often to have the funding be the only injection of capital that a business needs, alleviating the stress that often comes from being reliant on subsequent funding rounds to keep the business afloat.
But my point remains—calm companies come in all shapes and sizes. Calm is ultimately a feeling—and you’ll know it when you’ve got it.
Venture backed companies often feel more calm than bootstrapped companies
The second point I want to make is that there’s often an assumption that bootstrapping your business is a more calm approach than raising venture capital.
In short, I don’t think this is true.
I’ve more often found calm inside venture backed companies than bootstrapped ones, although both models have unique stressors. I know many bootstrapped founders will push back on this point, and of course there are exceptions.
- If you’re independently wealthy, bootstrapping will feel much more calm—absolutely!
- If your bootstrapped company grows very quickly from the start, bootstrapping will feel much more calm, too.
But for the vast majority of bootstrapped founders, the decision to bootstrap results in a good deal of financial stress. You’re forced to operate your life on a minimal budget, and your savings represent your business’ financial runway.
To make matters worse, your product evolves at a slower rate because you have fewer resources. Timetables are extended.
While you’ll answer to yourself as opposed to a board or other external stakeholders, you’ll carry the entire load of the business on your shoulders in a way that a founder of a venture backed company simply doesn’t. They’re playing with someone else’s money and can afford to hire a team to help carry the weight of the business.
While we’ve purposely constructed all aspects of Outseta to be calm from day one, there were absolutely times—particularly in 2020 and 2021—where the business felt anything but. We’ve bootstrapped deliberately and have always focused on profitability, but as I shared in my 5 year update a series of factors made things extremely stressful for some time. For me those factors included:
- I bought a house that was a financial stretch immediately prior to starting Outseta.
- It took us about 3 years to develop meaningful revenue.
- I was juggling Outseta with consulting work to make ends meet—juggling multiple jobs gets exhausting quickly.
- I unexpectedly had twin boys (well, a bonus child appeared!)
- A pandemic hit.
- We hit a point where sign ups for Outseta scaled up dramatically—suddenly we were supporting a large number of customers within a very small team.
- While we share the responsibility for customer support, the rest of our team is primarily focused on product. I'm the only true customer facing team member at Outseta.
These are things—in most cases—that simply couldn’t have been planned for or strategized out of the business. Calm flew out the window.
Inside a venture backed company, the stressors are simply different—there are expectations you’re supposed to deliver on, capital to return to your investors and their LPs. Venture backed companies that underperform certainly have unique stressors—people's jobs are on the line, and not much leeway is given. Layoffs loom. But it’s worth noting that even venture backed companies that grow very quickly feel the weight of expectations, too.
Even if your company is truly taking off, investors quickly realize that your company may very well hold the keys to them having a successful fund. They want the 10x return to be a 20x return, and they apply pressure to the team to do whatever it takes to get there.
But the stark contrast is that while investors may wield some control and apply pressure on a business, the employees of the business most often go home at night with a cushy salary, nice benefits, and a growing 401k. The turmoil of expectations is certainly a feeling, but it’s not draining blood from their day to day lives. Frankly, very few people in a venture backed company feel much of that turmoil except for people on the executive team.
In the later years that I was leading marketing at Buildium, we were heavily venture backed and growing quite quickly. While the organization was changing rapidly—which always brings some degree of growing pains—the company still felt quite calm comparatively. While change can be a bit disconcerting, when much of that change comes in the form of bigger opportunities and promotions the excitement of it all tends to subdue quite a bit of the turmoil. Growth brings with it good stress, which feels very different than bad stress.
Venture back companies often feel more calm for most people.
Performance aside, leadership sets the tone
The performance of a business and how it’s funded aside, a company’s leadership—starting with the CEO—plays an outsized role in how calm a company feels. Even if a company is performing well, CEOs that are “ideas people” often contribute to a feeling of unrest. Even if they are well intentioned, they often succumb to shiny object syndrome and are more apt to seemingly change direction with frequency. For team members who don’t thrive in such an environment, this can be very disconcerting.
Similarly, there are leaders who simply imbue calm even in times of chaos—in many instances they purposely shield their teams from the rough seas of their inboxes, financials, and board meetings.
All of this is not to say that calm leaders are necessarily better—there are times in company building where instilling a false sense of calm is absolutely counterproductive. But the qualities of a company’s leadership will directly impact what your day-to-day experience at any given company feels like.
Don't overlook product-model fit
Another significant factor that I see not often discussed is the extent to which your actual product idea, financial strategy, and the goals of the company work in harmony. For the sake of this post I'm assuming that calm is one of the goals of your business, so I'll focus on what I'll call product-model fit.
When we talk about business ideas in the context of SaaS, one of the factors related to your product idea that will reverberate the most is whether or not you choose to build a mission critical software product. When I say "mission critical," I mean that other businesses are reliant on your software to operate—not in a "all of sudden I can't schedule my tweets" way, but in a "if my service goes down my customers' businesses stop operating" way.
If you're electing to bootstrap or raise only a small amount of capital, you'll make your business much more calm by deliberately choosing not to build mission critical software. Speaking from experience, we chose to bootstrap a mission critical piece of software and it added to the stress associated with running the business in a massive way—especially in the early years. And it's not simply a matter of uptime.
Yes, the prospect of your software having downtime that affects your customers is hugely stressful—and that much more so in the context of a small team. But I'm the first one to tell you that this stress will be an omniscient feeling within your business, even if your product is perfectly stable and always online! Ask anyone who has run a mission critical software product, and they'll tell you that customers are always reaching out with messages starting with the word URGENT, suggesting that your product has taken their business offline.
Even when that's not true 99.99% of the time, you have to address the customers' outreach immediately and gently walk them through the steps required to show them that something on their end is ultimately causing the issue. Inevitably they'll realize this, apologize profusely, and everyone will move on but it's a calm killer nonetheless.
Only now that we have four engineers with 90+ years of software development experience spread across continents, sophisticated error monitoring procedures, a status page, and other infrastructure required of building a mission critical business is this a bit better. But if calm is your objective, this is a significant factor to weigh as you decide what to build.
True calm only comes with profitability and margin
Thinking on this topic for the last few years has led me to a simple conclusion—I don’t believe that a business can truly be calm until it’s profitable. Yes, calm is a feeling and you might feel it in spurts, but ultimately that feeling is fleeting. A business is something of a ticking time bomb until it’s reached profitability.
Start-ups by their very definition simply aren’t calm.
The oasis of a truly calm company can only be achieved, in my opinion, when a business is not only profitable but is also able to operate with a sizable amount of financial margin. Enough so that when tough times come, as they inevitably will, the business is able to absorb the bumps without layoffs, without slashing salaries, and without general turmoil.
That may sound idyllic—it certainly is. You cannot beat the volatility out of any business, but by operating a profitable business with ample financial margin the ticking time bomb simply stops ticking. Yes, there could still be an accident that causes it to detonate, but at least you're no longer marching towards the inevitable. You’ll be calmer than just about any other business.
Kudos to all of the founders who have already made it there. It takes a heck of a lot of work and a good deal of luck to sail your business into calm waters.